July 31, 2009 | Commentary on Budget and Spending
You get itemized bills from your doctor, your car mechanic and your cell-phone provider. Why not from the federal government?
Washington will spend $33,880 per household in 2009 - the highest level in American history (adjusted for inflation), and nearly $8,000 per household more than last year.
The federal government will collect $18,277 per household in taxes. The remaining $15,603 represents this year's staggering budget deficit per household, which, along with all prior government debt, will be dumped in the laps of our children.
Washington will spend this $33,880 per household as follows:
Social Security/Medicare: $9,418. The 15.3 percent payroll tax, split evenly between the employer and employee, covers most of these costs. This system can remain sustainable only if there are enough workers to support all retirees, which is why it risks collapsing under the weight of 77 million retiring baby boomers. If nothing is done, taxes eventually will need to rise by $12,000 per household (adjusted for both inflation and rising incomes) to pay all promised benefits.
Financial Bailouts: $6,328. Most of this $746 billion tab comes from the Troubled Assets Relief Program (TARP), which President Obama wants to double in size. In addition, $100 billion will bail out Fannie Mae and Freddie Mac, and $100 billion will be spent by the Federal Deposit Insurance Corporation (FDIC) to guarantee bank deposits at failing banks.
defense: $5,850. The defense budget covers everything from military paychecks to operations in Iraq and Afghanistan to the research, development and acquisition of new technologies and equipment. Lawmakers drastically reduced defense spending following the collapse of communism in the early 1990s. The 9/11 attacks reversed this trend, and the inflation-adjusted $2,332 per household increase since 2001 has returned defense spending closer to its historical levels (but still lower than during previous wars).
Anti-poverty programs: $4,745. Nearly half of this spending subsidizes state Medicaid programs that provide health services to poor families. Other low-income spending includes: Temporary Assistance for Needy Families (TANF), food stamps, housing subsidies, child-care subsidies, Supplemental Security Income (SSI) and low-income tax credits. Anti-poverty spending has surged since 2001: George W. Bush became the first president to spend 3 percent of GDP on federal anti-poverty programs, and President Obama will top 4 percent of GDP this year. State and local governments add another 2 percent of GDP.
interest on the federal debt: $1,210. The federal government is $12.9 trillion in debt. It owes $8.5 trillion to public bond owners, and the rest to other federal agencies (mostly to repay the Social Security trust fund, which lawmakers raid annually). Record-low interest rates have recently held down these costs. However, an avalanche of new debt and higher interest rates are set to quadruple annual net interest costs by 2019.
Federal employee retirement benefits: $982. This spending funds the retirement and disability benefits of federal employees, including the military.
Unemployment benefits: $902. Unemployment costs have doubled this year due to the recession.
Veterans' benefits: $819. The federal government provides income and health benefits to war veterans. Spending is up 58 percent since 2001.
Health research/regulation: $699. This spending is up 54 percent since 2001, and much of this growth is concentrated in the National Institute of Health. The category also includes the Food and Drug Administration and dozens of grant programs for health providers.
Highways/mass transit: $529. Most highway and mass-transit spending is financed by the 18.4 cent per-gallon federal gas tax. Washington subtracts an administrative cost and sends this money back to the states with numerous strings attached. Some economists suggest it would be more efficient to let states collect this tax and decide how to spend the money themselves.
Justice administration: $452. Justice spending includes federal attorneys and prisons, as well as law-enforcement grant programs. New homeland security costs have added $100 per household to justice spending.
education: $415. education spending is primarily a state and local function; 9 percent of the total comes from Washington. Between 2001 and 2010, federal education spending will have doubled. Most federal dollars are spent on low-income school districts, special education and college student financial aid.
The programs listed above cover $32,349 per household. The remaining $1,531 is allocated to all other federal programs, including natural resources, the environment, international affairs, regional development, farm subsidies, social services, space exploration, air transportation and energy.
Taxpayers -- and the next generation that will be paying nearly half of the bill -- must decide for themselves if they're getting their money's worth.
Brian M. Riedl is Grover M. Hermann Fellow in Federal Budgetary Affairs in the Thomas A. Roe Institute for Economic Policy Studies at The Heritage Foundation.
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